UK jobless rate rises, central bank split on stimulus

LONDON (Reuters) - British unemployment rose in February and wage growth slowed to a record low, suggesting cracks are starting to show in the labor market at a time when the central bank is split on another cash boost for the economy.

Britain’s main jobless rate rose to 7.9 percent in the three months ending in February, the highest rate since the three months to August 2012 when it was also 7.9 percent, the Office for National Statistics said on Wednesday.

The Bank of England, meanwhile, indicated that it was still some way from giving the flat-lining economy additional help to create jobs, prompting some economists to push back their forecasts for when more stimulus will come.

Minutes of the bank’s April policy meeting showed it remained divided on whether to restart asset purchases to spur economic growth, with no sign that the differences between policymakers were narrowing.

The euro hit a one-month high against sterling after the jobs data.

“A lot of the froth and really good news we had over the last year on jobs is becoming exhausted, which shouldn’t be a surprise when there is not much growth around,” said Alan Clarke, economist at Scotiabank.

Britain’s employment growth in the past year has puzzled policymakers and raised questions over how much longer its relative strength can be sustained without a pick-up in the economy.

One way employers have been able to keep staff is by limiting pay rises.

The ONS said average weekly earnings growth including bonuses slowed to 0.8 percent in the three months through February compared with a year earlier. Excluding bonuses, pay grew 1 percent - the smallest rise since records began in 2001.

CENTRAL BANK CONCERNS

Worries about inflation are also weighing on Bank of England policymakers.

Those opposed to more asset purchases this month said for the first time that they were concerned more stimulus could exacerbate a recent upward drift in inflation expectations, as well as weaken sterling further.

Economists polled last month by Reuters saw a roughly 60 percent chance of more asset purchases this year, on top of the 375 billion pounds ($573 billion) purchased between March 2009 and October 2012. Many saw a move as soon as May, when the central bank updates its quarterly economic forecasts.

But economists at J.P. Morgan concluded that a move now looks unlikely before August.

“The minutes do not suggest much fluidity in members’ views - and hence potentially their votes - as we move toward the May inflation report,” said J.P. Morgan’s Malcolm Barr.

Unblocking Britain’s credit markets may be a more urgent priority, central bankers said, adding that they “saw merit in possible extensions” to a scheme launched by the authorities in mid-2012 aimed at boosting lending further.

In the meantime, prospects for many jobseekers look precarious while the economy struggles to grow.

Although the number of people claiming jobless benefit fell by 7,000 last month, the number of those without a job on the wider ILO measure grew by 70,000 in the three months ending in February to 2.563 million.